Summary

The claimant peer-to-peer lender succeeded in claims against the defendant borrower for deceit and breach of contract, and in debt.

Facts

The claimant peer-to-peer lender claimed against the defendant borrower in debt under a number of loan agreements and for damages for breach of contract and deceit.

The defendant was a fine art dealer. He had been introduced to the claimant lender by a friend (F). He had borrowed £2.3 million from the claimant, secured on various works of art, under a number of loan agreements. The loan agreements and associated mortgages were in similar terms. They contained warranties that the defendant had good title to the art works and would not dispose of them or create other security over them. During the currency of the loans, the claimant became concerned that some of the art works had been pledged to another lender (N). The defendant defaulted on the loans and the claimant discovered that all the art works had been sold to pay other creditors of the defendant. The amount outstanding on the loans with interest and fees was over £3.2 million. The claimant brought proceedings in debt, and also for deceit alleging that the claimant had falsely represented that he had good title to the paintings, and for dishonest breach of contract on the basis of the defendant's sale of the paintings and failure to provide information in accordance with his contractual obligations. The claimant sought a finding of deceit or dishonest breach of contract because of the potential effect of the Insolvency Act 1986 Pt IX s.281(3). It applied for summary judgment and for the continuation of a worldwide freezing order over the defendant's assets.

Held

Deceit - The defendant did not appear and was not represented. He knew of the proceedings and had previously been represented by solicitors and counsel. He had put in evidence and a defence and had not applied for the hearing to be adjourned. The question of deceit could be decided on a summary basis and in the absence of the defendant, depending on the quality of the evidence, Wrexham Associated Football Club Ltd (In Administration) v Crucialmove Ltd [2006] EWCA Civ 237 considered. The claim in deceit turned on whether the defendant had already pledged the art works to N before entering into the loan agreements with the claimant. There was evidence in the case of one painting that it had been pledged to N some weeks before the defendant had entered into the relevant loan agreement with the claimant. However, in respect of the other loans the evidence was not sufficiently clear. If better evidence of the sequence of events was available from N, it had not been obtained. The allegation that the defendant had pledged all the works before taking out the loans had been clearly put in the claimant's pleadings and evidence but the court was not prepared on a summary basis to infer from the defendant's failure to respond to that allegation that it was deemed to be admitted. Except in the case of the one painting, the deceit claim was not made out on the claimant's evidence.

Dishonest breach of contract - The court was satisfied that the defendant was in breach of contract by selling the art works and by not informing the claimant about the pledges and subsequent sales, and that that breach of contract had been dishonest, Abou-Rahmah v Abacha [2006] EWCA Civ 1492followed.

Debt - The claim in debt succeeded.

Summary judgment - The claimant was entitled to summary judgment on its claims in debt and for damages for breach of contract and deceit to the extent indicated, and to continuation of the freezing injunction. There was no real prospect of a successful defence or any other reason for a trial, taking into account the fact that the defendant was being treated in Spain for addiction problems. The defendant claimed that he had been induced to enter into the loan agreements by reason of the undue influence of F and a director of the claimant. There was no basis for that defence on the facts and the defendant was not in a position to make restitution.

Application granted